Ireland's growth outlook gets downgraded in wake of Brexit
Published 16/07/2016 | 02:30
Specialist bank Investec has downgraded Ireland's growth prospects for this year and next in the wake of the Brexit vote.
It is the second global bank to revise down Ireland's GDP forecasts since the vote to pull out of the EU, with Cantor FitzGerald changing its forecasts within a week of the poll.
In an economic update to investors, Investec said GDP this year would grow by 4.8pc, 0.2 percentage points lower than forecast, and by 3.5pc in 2017, 0.5 percentage points lower.
"These cuts reflect greater caution about the prospects for export and investment growth in a post-Brexit world, which is partly offset by a stronger consumer profile as labour market data continue to impress," Investec economist Philip O'Sullivan wrote.
Mr O'Sullivan repeated the oft-used warning that as a small open economy, Ireland is vulnerable to global shocks.
He referred to the massive 26pc GDP growth rate for 2015, announced by the Central Statistics Office this week, noting a truer reflection of the health of the economy are tax revenues, retail sales and employment growth. But he warned: "As a small open economy, Ireland is not immune to international headwinds. The recent deterioration in the UK's prospects is clearly unhelpful in this regard, but it is worth noting that five-sixths of Irish exports go to markets other than the country's next door neighbour."
Investec said 2016 will be characterised as having a relatively strong first half to the year, particularly on the domestic side of the economy, while "weakening is inevitable" in the wake of the referendum.
It comes as Bank of England chief economist Andy Haldane said the regulator needs to act "promptly as well as muscularly" to stimulate the UK economy and boost confidence.
In his first speech since the vote, Mr Haldane said the BoE needed to come up with a "package of mutually-complementary monetary policy easing measures" in time for a rate-setting meeting on August 4.
Meanwhile Mr O'Sullivan moved to downplay the impact on Ireland's exporting sector from the Brexit decision. "While the UK remains a major trading partner for Ireland, its relative importance has declined over the past few decades.
"At the time that Ireland joined the then European Economic Community, some 58pc of merchandise exports went over the border into Northern Ireland or across the Irish Sea to Britain," Mr O'Sullivan said.
"Last year only 14pc of merchandise exports went to Ireland's next door neighbour.
"In the short term, a weak sterling is a headwind for many Irish exporters.
"Longer-term, the ultimate impact of Brexit on Ireland will be determined by the trading arrangements struck between the UK and the rump EU."
Meanwhile, separate data showed some volatility in the export data. Goods exports fell 1pc in May compared with April, and by 3pc compared with the same month last year, preliminary figures from the Central Statistics Office showed.
Seasonally adjusted goods exports decreased by €99m to €9.17bn compared with April. Goods imports for the same month jumped 7pc to €5.2bn leading to a decrease of €441m, of 10pc, in the seasonally adjusted trade surplus to €3.96bn in May.